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Fine Fragrance Finds Silver Lining

Annick Goutal, the Paris-based fragrance house, grew out of the passion of its founder and namesake, and the company and its artisanal fragrances have grown into an international brand with an amazing growth curve.

By: Karen A. Newman
Posted: February 2, 2009, from the February 2009 issue of GCI Magazine.

A murky cloud of flat sales hangs over fine fragrance like a fog that won’t burn off, but marketers around the world are seeking, and finding, the silver lining in that tenacious haze. While robust expansion plans may be somewhat tempered by the economic downturn, brands large and small are building stores, venturing into growing markets and trying new sales channels.

Current Conditions

In the 2008 holiday season, spending was down in general, and luxury goods did not fare well. According to SpendingPulse, a macroeconomic report tracking retail and service sales in the U.S., total retail sales were down as much as 8% in November and December. The economy was not the only culprit, however, as lousy weather across the U.S. kept shoppers at home. As a result, e-commerce may have benefited from homebound shoppers’ need to finish off those gift lists. Declines in 2008 online sales, when compared to 2007, were held to 2.3%, according to the report.

“As much as you try to be upbeat, the fact remains that fragrance sales are flat, in line with the economic downturn,” said Rochelle Bloom, president, The Fragrance Foundation. “And because this is not a category that is discounted, it’s hard to compete with the incredible discounts and sales being offered in stores at the moment. Fragrance can only compete if there is value, uniqueness or innovation that appeals to the consumers in this climate. Otherwise, they will pass. And it is not likely to change anytime soon.”

The challenges for fine fragrance, however, do not begin and end with holidays or a bad economy.

Bloom indicts a lack of innovation for flat fragrance sales. “The prestige brands continue to nurture and cherish their classics: Chanel, Dior, Guerlain. [And these], keep in mind, drive the glamour and aspirational aspects of this market segment and therefore sustain customer loyalty—even generation to generation,” she says. “Celebrity fragrances do create instant buzz and excitement, but come and go—as do the flankers in mass.”